J Miller New Inventory Graph-very good visual.

Question for J Miller:He says:

I am not including shadow inventory here—I don't have granularity for that, but at 6,500 units in shadow.

my question is..... how can you come to a 6,500 unit number without any granularity? I like that word(so high end)

I hope no one here believes that all of a sudden 6,500 units will appear on the market. Developers have bills to pay, how can they possibly let units sit for months and years? It doesn't make financial sense. That sold unit could be reinvested making more money, instead of just sitting there.

steveF, the 6,500 is most likely an estimate, and I don't think you need granularity to get a decent estimate at all. And there most definitely is shadow inventory - they won't dump them all on the market at the same time. This has been going on for some time, actually: sponsors will release a few units at a time, so as not to flood the market and make even casual buyers aware of how great the inventory really is. Will they sell unlisted units to interested buyers? Sure. But many developers, especially in larger buildings, keep just a fraction of the units listed. Until the development truly sells out, there will always be some out there, with the appearance of relatively few.

"But many developers, especially in larger buildings, keep just a fraction of the units listed."

A system perfected by Related.

And yes the graph is a great visual, I think I'm gonna cum. Close your eyes Steve.

Every year shows a steep decline this time of year, what does every year show January through April?

Actually this graph validates that just about anyone that doesn't HAVE to sell has pulled that listing of the market.

If you accept that supply and demand drives prices then the fact that we are approaching nominal inventory levels relative to the last seven years should tell us something. When inventory was sky high and we were posting 600k/mth job losses, and a myriad of other issues, not the least of which was the lack of access to credit, we saw prices drop precipitously. In many ways it was a perfect storm and it was supposed to be the year from hell.. Not sure its ending that way with 6000+ sales in the last 6 months. Will we see (or expect to see) the same kind of weather in 2010? Is the buyer pool drying up? Or is 2010 going to plod along much like the last 6 months?

bjw, it has been going on for a long time, the slow release of units. the difference now is that far more of the developments are finished or nearly so. if you start sales two years before completion it's easy in an up market to release a few at a time, have all or nearly all in contract upon completion of construction, and then close those that are in contract.

now, not so much. and i have to think the loans are closer to being due the later in the construction process.

aboutready, definitely. Do you think there will a large-scale forcing-of-the-hand to dump all listings at once because of the loans (and inability to refi)? My gut tells me no, but I don't think there's any real way to gauge this without some inside info on particular developments/sponsors.

bjw, i think it depends on the developer and the bank, it's a combination thing. some banks want to keep the loans from being written off for as long as possible. others, including many european banks that were very active in our market, may want to liquidate. some of the smaller developers won't have enough long-term potential for the banks to want to play the game. we're already seeing some of this. i've long considered going through the entire list of manhattan new developments and taking a shot at figuring out what the sales percentages have been, etc. some buildings, like manhattan house, would be extremely difficult as i have no clue what percentage of total units are available for conversion. also would like to figure out which buildings are in progress but aren't listed yet, and there are a surprising number of those.

i also think that in some of the emerging areas you may see banks take over and convert buildings that haven't been able to begin closings into rentals. that i think would be a positive thing, if done well.

> "But many developers, especially in larger buildings, keep just a fraction of the units listed."
> A system perfected by Related.

No, no way, no how. SteveF told us absolutely there is no such thing as shadow inventory.

I got 8,111 as of few hours ago

I have almost twice as much off market...

so the real inventory is 24000!
Wow
I should get out of my contract

I think people have gotten confused about what "shadow inventory" is with all the talk about whether or not to consider apartments which individual owners have temporarily taken off the market as shadow inventory.

It's not that all of a sudden 6500 units are going to come on the market. It's that the ALREADY ARE ON THE MARKET, they just aren't on anyone's system, because the developer only needs to have a couple of each sized unit on the market at any time to get it to show up when brokers do a search. The question is more like "do you really think that developers are going to eat 6500 apartments and let the permanently sit vacant and never officially list them?".

Even Miller seems to change his definition of shadow inventory depending on what number he wants it to come out to: as was pointed out, even here he in essence says "I don't have enough information to tell you how much shadow inventory there is, but it's 6500 units".

AR hits the nail squarely on the head when she points out that when a building isn't going to be finished for 2 years, this is much less meaningful than when the units are sitting there, finished, unsold an unoccupied. truthskr10 also hits the nail on the head by pointing out that EVERY SINGLE YEAR the graph shows a decline in inventory. but even more importantly, even at the current level W/O considering shadow inventory, is significantly higher than 2003, 2004 and 2007, and roughly equal to 2005 and 2006, and only ONE year significantly higher, 2008

____________________

David Goldsmith
DG Neary Realty